GameStop 2007 Annual Report Download - page 83

2. Acquisitions
On October 8, 2005, Historical GameStop and EB completed their previously announced mergers pursuant to
the Agreement and Plan of Merger, dated as of April 17, 2005 (the “Merger Agreement”). Upon the consummation
of the mergers, Historical GameStop and EB became wholly-owned subsidiaries of the Company. Both manage-
ment and the respective boards of directors of EB and Historical Gamestop believed that the merger of the
companies would create significant synergies in operations when the companies were integrated and would enable
the Company to increase profitability as a result of combined market share.
Under the terms of the Merger Agreement, Historical GameStop’s stockholders received one share of the
Company’s common stock for each share of Historical GameStop’s common stock owned. Approximately
104,135 shares of the Company’s common stock were issued in exchange for all outstanding common stock of
Historical GameStop based on the one-for-one ratio. EB stockholders received $19.08 in cash and .39398 of a share
of the Company’s common stock for each EB share owned. In aggregate, 40,458 shares of the Company’s Class A
common stock were issued to EB stockholders at a value of approximately $437,144 (based on the closing price of
$10.81 per share of Historical GameStop’s Class A common stock on April 15, 2005, the last trading day before the
date the merger was announced). In addition, approximately $993,254 in cash was paid in consideration for (i) all
outstanding common stock of EB, and (ii) all outstanding stock options of EB. Including transaction costs of
$13,558 incurred by Historical GameStop, the total consideration paid was approximately $1,443,956.
The following table summarizes unaudited pro forma financial information assuming the mergers had
occurred on the first day of the period presented. The unaudited pro forma financial information does not
necessarily represent what would have occurred if the transaction had taken place on the date presented and should
not be taken as representative of the Company’s future consolidated results of operations. At the time of the mergers,
management expected to realize operating synergies from reduced costs in logistics, marketing, and administration.
The unaudited pro forma information does not reflect these potential synergies or expenses associated with the
mergers or integration activities:
52 Weeks
Ended
January 28,
2006
(In thousands, except
per share data)
Sales......................................................... $4,393,890
Cost of sales ................................................... 3,154,928
Gross profit .................................................. 1,238,962
Selling, general and administrative expenses ........................... 930,767
Depreciation and amortization ...................................... 94,288
Operating earnings............................................. 213,907
Interest income ................................................. (6,717)
Interest expense ................................................ 85,056
Earnings before income tax expense ................................ 135,568
Income tax expense .............................................. 49,482
Net earnings ................................................. $ 86,086
Net earnings per common share — basic .............................. $ 0.60
Weighted average shares of common stock — basic ...................... 143,850
Net earnings per common share — diluted ............................. $ 0.56
Weighted average shares of common stock — diluted ..................... 152,982
F-16
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)